Rupee plunges against dollar, gold shines

Currency loses Rs2.34 to close at Rs156.58 in inter-bank market


Salman Siddiqui March 10, 2020
PHOTO: REUTERS

KARACHI: The rupee depreciated around 1.50%, or Rs2.34, to close at Rs156.58 against the US dollar in the inter-bank market on Monday, the State Bank of Pakistan (SBP) reported.

On Friday, it closed at Rs154.24 to the US dollar. “This is the first-ever drop in the rupee in the past six months,” said Arif Habib Limited Head of Research Samiullah Tariq.

The drop is seen on worries that the flow of dollars may slow down into Pakistan on account of impact of exports and workers’ remittances. “We can potentially see a cumulative reduction in exports and remittances by around $1-2 billion,” said Topline Securities CEO Muhammad Sohail.

The inflows may decrease due to a likely drop in demand for Pakistani goods in export markets whose earnings may further squeeze due to their full-time engagement in fighting against the deadly coronavirus.

Secondly, the worst slump in international oil prices - since the 1991 Gulf War - may slow down remittances. Majority of Pakistani workers are living in oil-producing and exporting countries ie Saudi Arabia and the UAE. Oil prices crashed 30% on Monday following a disagreement between cartel of oil-producing and exporting countries (OPEC) and Russia on cutting production. Later on, Saudi Arabia initiated price-war through increasing its output.

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The global economy is set to face adverse implications due to the rapid spread of coronavirus around the world. The number of people infected with coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic damage. The drop in rupee’s value caused an uptick in the gold price in Pakistan despite a decrease in the precious metal at global markets.

All Sindh Saraf and Jewellers Association (ASSJA) reported the bullion up by Rs700 per tola (11.66 grams) to Rs95,200 on Monday. The gold decreased $9 per ounce (31.10 grams) to $1,666 at London market in the afternoon as per Pakistan standard time, the association reported. 

Published in The Express Tribune, March 10th, 2020.

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